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Cheap Talk and Burned Money

  • David Austen-Smith
  • Jeffrey S. Banks

We augment the standard Crawford-Sobel (Econometrica 1982) model of cheap talk communication by allowing the informed party to use both costless and costly messages. The issues on which we focus are the consequences for cheap talk signaling of the option to use a costly signal ("burned money"); the circumstances under which both cheap talk and burned money are used to signal information; and the extent to which burning money is the preferred instrument for information transmission.

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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1245.

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Date of creation: Nov 1998
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Handle: RePEc:nwu:cmsems:1245
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  1. Farrell, Joseph & Gibbons, Robert, 1989. "Cheap Talk with Two Audiences," American Economic Review, American Economic Association, vol. 79(5), pages 1214-23, December.
  2. A. Blume & Y. G. Kim & J. Sobel, 2010. "Evolutionary Stability in Games of Communication," Levine's Working Paper Archive 530, David K. Levine.
  3. Steven A. Matthews, 1989. "Veto Threats: Rhetoric in a Bargaining Game," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 347-369.
  4. repec:hoo:wpaper:e-89-7 is not listed on IDEAS
  5. Blume, A., 1991. "Equilibrium Refinement in Sender-Receiver Games," Working Papers 91-28, University of Iowa, Department of Economics.
  6. Farrell Joseph, 1993. "Meaning and Credibility in Cheap-Talk Games," Games and Economic Behavior, Elsevier, vol. 5(4), pages 514-531, October.
  7. van Damme, E.E.C., 1989. "Stable equilibria and forward induction," Other publications TiSEM bd598a8f-f017-4cab-a9ed-8, Tilburg University, School of Economics and Management.
  8. Farrell, Joseph & Gibbons, Robert, 1988. "Cheap Talk Can Matter in Bargaining," Department of Economics, Working Paper Series qt3qz786xq, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  9. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
  10. Steven A. Matthews & M. Okuno-Fujiwara & Andrew Postlewaite, 1990. "Refining Cheap-Talk Equilibria," Discussion Papers 892R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Austen-Smith David, 1993. "Interested Experts and Policy Advice: Multiple Referrals under Open Rule," Games and Economic Behavior, Elsevier, vol. 5(1), pages 3-43, January.
  12. Joseph E. Harrington, 1992. "The Revelation Of Information Through The Electoral Process: An Exploratory Analysis," Economics and Politics, Wiley Blackwell, vol. 4(3), pages 255-276, November.
  13. Rabin, Matthew, 1990. "Communication between rational agents," Journal of Economic Theory, Elsevier, vol. 51(1), pages 144-170, June.
  14. Gilligan, Thomas W & Krehbiel, Keith, 1987. "Collective Decisionmaking and Standing Committees: An Informational Rationale for Restrictive Amendment Procedures," Journal of Law, Economics and Organization, Oxford University Press, vol. 3(2), pages 287-335, Fall.
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